India's wholesale inflation eases to near five-year low
2014-09-16 10:41:01
India's wholesale inflation fell to near a five-year low in August, due partly to lower food and global commodity prices.
The wholesale price index rose 3.74% from a year earlier, according to government data issued Monday. The reading was much lower than July's 5.19% and the median forecast of 4.40% by economists surveyed by The Wall Street Journal.
A correction in food prices after a spike in July, lower global commodity prices and a stable rupee led to a broad-based decline in wholesale inflation, said Bansi Madhavani, an economist at STCI Primary Dealer, a market maker in government bonds.
Wholesale inflation primarily measures the prices paid by local producers importing manufactured goods for use as inputs. Manufactured goods have a 65% weight in the index.
However, the relatively benign reading is unlikely to trigger any near-term interest-rate cuts by the Reserve Bank of India, which is more concerned about consumer prices, which continue to rise at a worrying pace, economists said. Government data released Friday showed consumer inflation at 7.80% in August, down slightly from 7.96% in July.
The wholesale data "may make the central bank a bit more comfortable and a bit more optimistic about the path of inflation in the near term," said Devika Mehndiratta, an economist at ANZ. "But they may not react until they are sure that consumer prices too are in a sustainable downtrend."
Monday's data show wholesale fuel prices rose a much slower 4.5% from a year earlier in August, compared with a rise of more than 7% in July. Wholesale food prices rose 5.15% after an increase of more than 8% over each of the past several months.
Still, RBI Governor Raghuram Rajan won't lower interest rates until at least the first quarter of next year, when he has a clearer picture of where consumer inflation is headed, economists said.
The Reserve Bank of India is expected "to maintain a cautious stance and keep the repurchase rate unchanged in the upcoming policy review," said Aditi Nayar, senior economist at rating firm ICRA, a unit of Moody's Investors Service.
The central bank will review monetary policy Sept. 30. Despite industry pressure to lower rates, Mr. Rajan hasn't cut rates because of high consumer inflation. The RBI wants consumer inflation to be no higher than 8% by January and ease to 6% by January 2016.